By Stephen Collinson

WASHINGTON — Republicans launched a new bid Friday to make President Barack Obama's effort to extend a tax holiday for 160 million Americans conditional on a contentious US-Canada pipeline project.

The president's conservative foes warned they would not extend the payroll tax cut without a measure designed to speed a decision on building the pipeline, which environmentalists oppose and Obama has delayed until after 2012 elections.

The move was the latest twist in a bitter pre-Christmas game of brinkmanship that is drawing new battle lines ahead of Obama's reelection bid next year.

Obama is daring Republicans to leave town without providing relief to middle class Americans trapped in tough economic times, while his foes want to further dent the president's authority before he seeks a second term.

There was one break in the partisan fury though as the House of Representatives voted 296-121 to pass a $915 billion bill to fund the government through fiscal 2012 -- averting a pre-Christmas shutdown. The Senate was due to vote on the measure on Friday or Saturday

Seeking to stimulate the sluggish recovery, Obama wants to extend a payroll tax holiday to give workers a $1,500 tax cut next year, warning that failure to act by the end of December will saddle them with a $1,000 tax hike instead.

But House Speaker John Boehner complicated the process by inserting a measure in the payroll tax bill requiring the State Department to make a decision on the Keystone XL pipeline within 60 days.

Boehner said that if the Senate sends the House a payroll tax bill stripped of the pipeline language, he would reinsert it and send it back.

"If that bill comes over next week, we'll make changes to it and I guarantee that the Keystone pipeline will be in there when it goes back to the United States Senate," Boehner told reporters. Senate Republicans backed his position.

Obama has already warned he will not accept a bill with Keystone included, setting up a fresh test of wills with his Republican foes.

White House spokesman Jay Carney refused to indicate whether the president would veto a payroll tax cut bill that included the pipeline project, but he left plenty of political wiggle room.

"The president's priority is ensuring that Americans do not get that tax hike. This money is vital. This tax cut is vital to every American family that's trying to make ends meet," Carney said.

Obama's aides say that a decision on the pipeline is in the purview of the executive branch of government and not Congress, warning that the State Department will have no choice but to kill it if given only 60 days to consider complicated environmental questions.

Republicans in the Senate and the House meanwhile were in the final stage of talks on agreeing a compromise on the Senate version of the payroll tax cut, which then would have to be reconciled with the House version.

Obama is also calling on Congress to extend unemployment benefits for jobless Americans struggling amid tough economic times.

"We're not there yet, but we're very, very close," said Democratic Senate Majority Leader Harry Reid.

The Keystone XL pipeline extension would bring oil from Canada's tar sands to the US Gulf Coast and has triggered a fierce row between environmentalists, the government and the business lobby.

Republicans say the project would create 20,000 jobs, but Obama put off a decision on the pipeline until after the election, drawing complaints he was trying to appease warring Democratic constituencies.

The White House will not get its wish for the payroll tax cut extension to be paid for by a surcharge on millionaires.

Democrats backed down on that issue, as Boehner mocked them for not having the votes to pass it.

Copyright © 2011 AFP. All rights reserved.

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